US Tax Revenues Up 9.7% through four months, Deficit Down 57%; US Media Outlets Mostly Ignore the News

There’s a good chance you didn’t hear about this (original US Treasury report is here):

Both Brian Wesbury at FT Portfolios and yours have to confess to being wrong so far this year on revenue growth. We both have been thinking (Wesbury here, BizzyBlog here) that itâ€™s going to come in at 9%, but as you see, through four months itâ€™s actually pushing 10%.

Even with spending control slipping a bit (up 6.4% in January 2007 compared to January 2006), the deficit is 57% lower through the first four months of FY07 than it was at the same time in FY06. I believe that merits a “Wow.”

While there is some coverage of the budget news — this Yahoo! search at about 6:30 a.m. this morning on “federal deficit” (without quotes) has about 20 citations in the first 70 listings going back to the time of the yesterday’s Treasury release — there is no disputing its relatively muted treatment. The online versions of the New York Times, Washington Post, and USA Today do not have links to the news on their home pages, or even on their business section home pages (USAT does have an “On Deadline” blog entry). The Times has a fairly long article (may require registration) comparing the current expansion, which started in 2003, to the early years of the Clinton economic expansion, but does not bring out yesterday’s news about the shrinking deficit.

ABCnews.com? Nope (not on home page or at Money & Business). MSNBC? Get real (“New evidence bolsters teen driver training” is apparently a more important home-page business story listing; there is no mention of the Treasury release on MSNBC’s business page). CBSnews.com? Surely you jest (not on home page or business page). Fox? Sorry (not on Main, Business, or “U.S.” home pages).

UPDATE 2:TaxProf has a great chart showing how capital gains realizations/reported, and capital gains taxes collected, ballooned after the 1997 capital gains tax rate cut from 28% to 20% (many of you didn’t know Bill Clinton was a closet supply-sider, did you? Now you know real reason why the late 1990s were prosperous.) — and then again in 2004 after the 2003 Bush-led rate cut to 15%. 2005 and 2006 data will almost undoubtedly show similar results.

More important than the taxes collected is that average annual reported capital gains subject to taxation TRIPLED from 1990-1996 to 1998-2004 (I do not know why 1997 is not included).

An even cooler number (one that isn’t available at the PDFs linked at TaxProf, would be the annual gross proceeds from all of the asset sales that gave rise to those gains. I would expect that it is a multiple of the gains alone that were subject to taxation. Why would those numbers be important? Because the increases in annual gross proceeds would represent capital deployed to a higher use that would likely have stayed locked in before tax rates were lowered. To the extent that capital is redeployed to better uses by people who know what they are doing, that should lead to greater innovation and higher economic growth.

UPDATE 3: In response to the many commenters and trackbackers concerned that the Formerly Mainstream Media will attempt to portray a return-to-surplus situation as something the new congressional majority is entitled to credit for when it comes — Be ready with these responses, and in fact plant the seeds now where needed:

Anything that happens in the economy and with the federal budget between now and September 30, 2007, will be affected by the budget passed by the 109th Congress and agreed to by the Bush Administration. The new Congress will only have an impact if it takes specific action that affects the CURRENT fiscal year.

Anything that happens in the economy and with the federal budget during the next fiscal year that will end September 30, 2008 will be affected by both the 110th Congress and the Bush Administration — not necessarily in that order.

If you go to this October BizzyBlog post, you’ll see that I’m not particularly impressed with the concept of a “surplus” as most define it, because the current large Social Security annual surpluses are needed (i.e., “raided”) to accomplish that. A true surplus that begins to actually leave the Social Security surplus where it belongs (i.e., the Social Security system) won’t, according to my projections, take place until FY 2012 — and that’s only if the Bush tax cuts of 2001 and 2003 are extended past their current expiration in 2010. If that doesn’t happen, forget about the idea of getting to a true surplus while leaving Social Security alone for quite a long time.

50 Comments

If you haven’t already seen it, The Skeptical Optimist has updated his forecast with these latest numbers. The new prognosis: the federal budget will move into balance as early as June 2008 (by Washington DC standards, that is.)

I think there is an error in this article. Under fiscal year 2006 it says *(in billions)*. I think it should read *(in millions)*. At least that is what is says in the original report issued by the treasury dept.

THANKS for the catch! (doh) It would be nice to turn millions into billions just like that, eh? :–> Tom

Once the MSM figures out that they can give the credit to the Democratic takeover of Congress, they will report on the deficit numbers. It would be a little too blatantly obviously partisan now, so it wont happen yet.

Maybe in six months to a year we’ll see “Democratic Congress hands Federal Budget Surplus to Bush” in the NYT.

It wouldn’t surprise me if the MSM waits until the Democrats can take credit. Right now, it is too appealing to talk about the tax cuts and how they benefit the “rich”, since Bush is inexplicably continuing to push for them. :-) The MSM has a progressive bend that views economies in simplistic terms which has failed every time it is codified for centuries. For many, it is irrelevant that the “rich” are paying more in taxes than they were prior to the cuts, precisely because tax cuts (typically) have the results we are seeing.

So the MSM focuses on economic news that serves its entertainment purposes, without informing the population.

For a similar reason, I suspect, the MSM do not report on the amazing Irish economy over the last 30 years or so, and the lackluster quasi-socialist economies in much of western Europe. Because to do so would point at the straw man that constitutes much of their economic worldview.

Thank you for your continuing analysis, free from the spin I just added.

[...] With Bush’s tax cuts still in effect, federal tax revenue IS UP by 9%, and the federal deficit down by 57% (over a four month period), according to BizzyBlog: What happens if a deficit falls and almost no one reports it?. The blogger, TBlumer, goes on to say this: There is a very real possibility that the federal budget will be in a surplus situation when President Bush hands over the keys to the White House in January 2009. [...]

The deficit may go down. But it will be at the expense of our elder, Medicare, or poor, Medicaid, or our troops, funding for the VA. This is the worst administration of my lifetime, and comes periously close to burying the middle and lower classes for the benefit of the war and tax cuts for the very rich.

[...] Lets look past the hyperbole for second, shall we, and focus in on some facts.Â The American economy has grown 3.4% over the past four quarters.Â The congressional budget office has announced that the deficit is falling despite projections that it would increase ( 57% lower over the first four months of fiscal year 2007 as compared to the first four months of fiscal year 2006). [...]

#15,
– Domestic spending on the programs you love so dearly has been going up at rate exceeding inflation for years and years and years, including the current admin.
– NY state spends $11,000 per Medicaid RECIPIENT (NOT family). How can even half that not be enough?
– The best Medicare solution set was proposed by the Breaux (Democrat) commission in about 1998. Bill Clinton rejected it.
– The *evil rich* are paying a lot more in capital gains taxes because of the tax cuts you do despise, and are paying a very, very disproportionate share of the total tax burden.

#21, they aren’t fudged numbers. The report reflects actual receipts and actual outlays. There may or may not be other budget-related reports that aren’t all-inclusive, but this isn’t one of them. Shouting to the contrary doesn’t make it so.

I’ve also just reviewed some VA data, and it is clear that they have been increasing spending, and plan to continue to increase it. We can argue about whether the increases are enough, but you can’t argue that there are any “cuts,” because there aren’t.

There are no overall annual spending cuts in Medicare or Medicaid either. There just aren’t.

As the Salon blog entry notes VA spending is up 83% since Bush took office. Spending per veteran in real terms is obviously wayyyyy up, even after considering the addition of those who have served in the GWOT.

It is not unreasonable to believe that a culture of waste or carelessness or inefficiency has developed because of the spending expansion. IF (emphasize IF) that is the case, a freeze followed by a reduction would not necessarily be out of line.

The fact is that both you and I don’t know whether the VA is being a good steward of the extra money that has been showered on it in the past 6 years. Until you or I do, it’s not appropriate to assume that the Bush admin is kneecapping vets. Money does not equal compassion.

#1, the person he has the bet with is being a jerk about it. I went to the guy’s post, and he won’t allow any realistic qualifiers (like if Nancy Pelosi and crew get a tax increase and Bush doesn’t stop them).

[...] Meanwhile, the mainstream press is also evolving, as we see daily in what the “mediating intelligences” decide to report and not report. For example, you don’t hear much about good news like this. The president is the wrong party, and he’s Bush, besides, so good (or vital and informative) news is not allowed out unless it simply cannot be contained. But most of it is containable. And what is not containable is either fixable or obfuscatable…if that’s a word! [...]

[...] …does anyone report it?Â From BizzyBlog: Even with spending control slipping a bit (up 6.4% in January 2007 compared to January 2006), the deficit is 57% lower through the first four months of FY07 than it was at the same time in FY06. I believe that merits a â€œWow.â€ [...]

Think of a deficit like being under water, and the occasion of “falling” as being allowed to rise closer to the surface. No air tank? Can’t breathe yet? Neither can the American taxpayer. It’s not the up or down of the deficit that is important, it’s the positive or negative balance of the budget overall. What we need is a surplus, not a change in the rate at which the US Government is bankrupting itself.

[...] Deficit Fell, and No One Reported It? February 13, 2007 Posted by carinrose in Uncategorized. trackback I’d say that it’s just another normal day for our left-biaed media. US Tax Revenues Up9.7% through four months, Deficit Down 57%; US Media Outlets Mostly Ignore the News: There is a very real possibility that the federal budget will be in a surplus situation when President Bush hands over the keys to the White House in January 2009. Four months ago, I first suggested that it might very well happen. Brian Wesbury now agrees. The Skeptical Optimist has seen this happening for an even longer time. (Update â€” SkepOpâ€™s latest post [Feb. 13; HT Ironman in comment below] is projecting that the budget is on track for balance in June 2008.) [...]

According to the Congressional Budget Office, the on-budget deficit in 2006 was $434 billion.

This explains why the total public debt increase from $7,932,709,661,723.50 at the end of 2005 to $8,506,973,899,215.23 at the end of 2006.

Testimony of Chairman Ben S. Bernanke
Long-term fiscal challenges facing the United States
Before the Committee on the Budget, U.S. Senate
January 18, 2007

The on-budget deficit, which differs from the unified budget deficit primarily in excluding receipts and payments of the Social Security system, was $434 billion, or 3.3 percent of GDP, in fiscal 2006.1

Footnotes

1. Excluding the operations of both Social Security and Medicare Part A, the budget deficit in fiscal year 2006 was $459 billion, or 3.5 percent of GDP. Like Social Security, Medicare Part A pays benefits out of, and receives a dedicated stream of revenues into, a trust fund.

“Anything that happens in the economy and with the federal budget between now and September 30, 2007, will be affected by the budget passed by the 109th Congress and agreed to by the Bush Administration. The new Congress will only have an impact if it takes specific action that affects the CURRENT fiscal year.”

The 109th Congress passed only the Homeland Security and Defense Department budget bills and continuing resolutions to keep the rest of the government running at fiscal year 2006 levels until February 15th.

I don’t realy care about the so called deficit, both political parties have been hiding real costs for years. Federal debt as of Sep 30, 2005 : $7,932,709,661,723.50
Federal debt as of Sep 30, 2006 : $8,506,973,899,215.23
Increase during the 2006 fiscal year: $574,264,237,491.73

A deficit isn’t like being under water. A deficit is like floating on the water on a raft with a slow leak and an air pump. It beats the hell out of being in the water, and so long as you keep pumping, the raft will take you where you want to go.

Deficits are the way business is done. I keep hearing (not here…my first visit to this blog) that the gov’t should be run like a business. Well businesses generally hate surpluses when it comes to the bottom line. A surplus generally mean you haven’t reinvested enough to grow your business.

We deficit spend on a personal level every time we whip out the plastic to buy a meal, or we take out a mortgage. Sure I could pay cash for my food, but I get 28 days to earn interest on that money before I have to pay the credit card. On a mortgage, most people can’t afford to plop down hundreds of thousands of dollars for a house. Deficit spending allows us to significantly improve our lives by becoming property owners who, in most cases, will realize a net profit on our expense.

The only time a deficit is a problem is when payments towards that deficit outpace our income. Or, to go back to our allegorical raft, when it leaks air faster than we can pump.

Judging by the numbers posted here, I’d guess the president has forearms like Mark McGwire’s.

You are preaching to the choir. The misreporting has been happening for decades across admins of both parties. That does not change the fact that the tax-receipt performance and deficit reduction have been pretty impressive so far this fiscal year.

Even more important than the tax code changes to Capital Gains are the changes to Dividends…

Why…

Because Corporations (evil Oil, Haliburton, etc…) have to pay dividends with taxable profits. For EXXON to pay a dividend they have to declare earnings – and thus pay tax on those earnings.

Why would Big Oil want to show more profit? They don’t, but you want them to. You want cold hard cash. You do not want to wait around for ENRON style stock appreciation. Congressman William Jefferson can attest to the value of cold hard cash – he did not take his bribes in ENRON stock!!!

#44, the NATIONAL DEBT is not shrinking. The reported monthly deficits as the government current reports them are, over time and considering seasonal factors, getting smaller. But as noted in Update 5, the way the government reports the monthly deficit (netting the Social Security Surplus against operations, as has unfortunately been the case for 40+ years) leaves a lot to be desired.

[...] Worst Economy Since Edgar Hoover: Tax revenues up 9.7%, deficit down by 57%. If this economy gets any worse, we’ll have to start gold-plating our toilet paper to get rid of all of those damn greenbacks cluttering up the hall. MSM withholds reporting it until 2009, when they can give the Democrats full credit for it. Posted by Emperor Misha I @ 5:55 pm | | 1 Views [...]

[...] Even with spending control slipping a bit (up 6.4% in January 2007 compared to January 2006), the deficit is 57% lower through the first four months of FY07 than it was at the same time in FY06.Â There is a very real possibility that the federal budget will be in a surplus situation when President Bush hands over the keys to the White House in January 2009. – TBlumer @Â BizzyblogÂ via The EmpireÂ and ConservativeGrapevine.com [...]

The relief of the economic growth has given to the federal deficit, is most likely very temporary, or in the other words of federal reserve chairman Ben Bernanke in his testimony to the committee on budget, House of Representatives February 28, 2007 “Unfortunately, we are experiencing what seems likely to be the calm before the storm.”
You can not simply rely on economic growth to balance a budget. You must control spending, in particular spending on entitlements such as social securites, medicare and medicaid, assuming defense spending is significantly reduced as promised if not include that. Even though a strong economy helps it alone is not enough Bernanke “To some extent, strong economic growth can help to mitigate budgetary pressures, and all else being equal, fiscal policies that are supportive of growth would be beneficial. Unfortunately, economic growth alone is unlikely to solve the nation’s impending fiscal problems” The problem here is that when the economy grows so do the entitlements associated with it. The economic growth can not keep up the rising healthcare costs or even stay in the same ballpark.
With life expectancy growing longer, and fertility rates declining we will have less people paying into a system for a growing population. We have to come with a system to reduce healthcare costs, to balance the budget.
I will agree that Bush’s policies promote economic growth, but he fails to deal with the associated cosequences come with it which make it virtually impossible to balance a budget. Comparing Clinton to bush on the economy, is like comparing a Rhodes scholar to a C-student
you read ben bernanke testimony here http://www.federalreserve.gov/boarddocs/testimony/2007/20070228/default.htm

#49, I don’t disagree at all until you assign “blame” for where we are.

Clinton shares equally with Bush. The late-1990s prosperity would have been a perfect time to introduce private SocSec accounts, or a policy-driven retirement age dictated by the ratio of workers to retirees (i.e., the age would rise to stay within a mandated ratio), or any number of other “fixes” that might have been put into place to enable SocSec to run in place for generations. But no …. Clinton couldn’t keep it zipped, and then he perjured himself over it, and lost all his political capital. Bush, meanwhile, just hasn’t tried hard enough to sell SocSec reform …. or anything else.

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